UST is stable in name only

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The Terra Network (LUNA) collapses and the industry comments: UST is just a fixed coin by nameAs the cryptocurrency industry concludes the collapse of the TerraUSD (UST) project, manufacturers of alternative stablecoins are trying to emphasize that these tools are not created equal and that there are significant differences between them.

  • UST’s algorithmic stabilkoin fell from $ 1 to just 5 cents a week
  • When the collapse of a token has a negative impact on the entire fixed coin industry, its representatives warn you not to throw all projects in the same bag.
  • TerraUSD, Tether and USDC, for example, are completely different initiatives
  • More similar and interesting articles can be found on the homepage

Circle director says TerraUSD (UST) and USDC are two different assets

Dante Disparte, chief strategist and global policy director at Circle, a USDC stablecoin producer, said the message was not loud enough. This is not clear to many people outside the cryptocurrency industry, and may include regulators and politicians, whose attention will now be focused on the industry.

– I think this is a topic of discussion. The term Stabilcoin is now seriously tarnished. Do algorithmic stablecoins even belong to the class of tools that are subject to existing rules? Whether they belong to the real consumers and the field of real payments? – Asked rhetorically in the program Disparte Money Reimagined.

Circle’s USDC, sponsored by BNY Mellon and recently funded by BlackRock, the world’s largest asset manager, is now worth $ 49 billion, according to CoinMarketCap.

Tether, the largest stablekoin backed by physical assets (including dollars) with a market capitalization of $ 79.3 billion at the time of writing, remained stable this week, despite shaking a hard sign against the dollar for some time.

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Stabilcoins are divided into several categories

Speaking of the Terra problem During the discussion on TwitterTether chief technology officer Paolo Ardoino reiterated Disparte’s call for a clearer classification of stablecoins.

– We would like to see a classification of centralized stabilcoins and algorithmic stablecoins, where we see that Tether is the largest. I think it is really important to have some rules to protect customers Ardoino commented.

Disparte said that while regulators have so far focused on asset-backed stabilcoins such as the USDC, algorithmic stabilcoins have so far been a bureaucratic “dark spot”.

– They are the ones who lose, so I think this is a problem with a certain type of asset. This is just a stablecoin problem in name. The risk is that it is important to talk about politics in such matters he added.

Currently, there are three types of stablecoins: traditional currencies (USDT, USDC), cryptocurrencies (DAI, sUSD) and algorithmic ones (UST, IRON).

Although the classifications are vague, some lawmakers are making a difference, as Republican Sen. Pat Toomey of Pennsylvania said when he testified at the UST Congress earlier this week.

Algorithmic Stabilcoins are not created equal. When the UST collapsed, the DAI and Maker defended themselves

As for algorithmic stablecoins, there is an additional spectrum in this category, said Fernando Martinelli, CEO of Balancer Labs, an automated market maker in the decentralized finance (DeFi) sector.

– There has always been a question mark in this third category of algorithmic stablecoins. It is not possible to determine whether an algorithmic stabilkoi is worthless or not well designed. There are algorithms that have high security, but are not overly secure he claimed.

DAI, a five-year ultra-safe stablecoin controlled by the MakerDAO community since it began to sway at the bottom of the terrace, has stood firm and carried out regular mortgage foreclosures, “it was a big test of the system,” said Luca Prosperi, head of credit supervision at MakerDAO. .

MakerDAO’s DAI is stable because it is conservative and has extreme security, Prosperi said. The current protection ratio is 175.59%, which means that each DAI is provided with $ 1.7558. According to a chain compiled by Dai Stats, the USDC currently holds 41% of the collateral used to produce new DAIs.

Maker began closing automatically, canceling collateral to protect itself, and narrowed it to a market capitalization of $ 6.4 billion.

– The Creator did exactly what he had to do. The economy is shrinking, the currency base is shrinking, so it has shrunk – Prosperi said in an interview.

– The system is stable, because it is very conservative, and it required a lot of effort from team members, because the society is very impatient. As Terra grew up, many people accused us of being too conservative. But we keep our currency he added.

Regarding Circle’s terminology problem and how it would look to regulators, Prosperi said calling something “stablecoin” is a great marketing tool. However, he warned against a simple classification.

At one end of the spectrum is the USDC, “a very safe, not very innovative, but simple coin with a big bridge,” Prosperi said. The other extreme UST and DAI are in the middle.

– I think we will see that the term is increasingly diversified with terms that better reflect what the single uses for each of these projects are, and I think some of the best projects will work together. I think USDC could be an excellent guarantee for Maker, which can create a conservative leverage cover with DAI. He explained.

Regarding the regulatory control of algorithmic stabilcoins after the collapse of the UST, Prosperi said that MakerDAO is a “strange animal” because it is a decentralized society that cannot be extinguished.

– I think there will be some pressure from the regulators. But I think Maker is probably not on the front lines. USDT, USDC are ahead and other services that allow liquidity to enter the chain will be examined. Prosper concluded.

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